ABB taking $430M charge to exit solar inverter business

Diversified energy firm ABB is taking a charge to exit another of its power businesses and focus on its core electrification segments.

The Swiss technology giant is shipping its solar inverter business to FIMER S.p.A of Italy. ABB reported that the division generated approximately $290 million in revenue last year.

“We are glad to announce this further step in our development as FIMER’s focus on the solar business will be greatly enhanced by this integration,” FIMER CEO Filippo Carzaniga said in a statement. “Our commitment to positively influencing the energy market will be realized through the development of new product platforms and innovative digital technologies. We will continue the excellent job carried out by ABB in recent years, combining precious resources, knowledge and expertise in Italy and worldwide. With a strengthened portfolio, we are better placed to shape the future of this increasingly strategic business.”

This move follows the news earlier this year that ABB is selling its power grids business to Hitachi, which includes grid automation, integration, transformers and high voltage products.

“The divestment is in line with our strategy of ongoing systematic portfolio management to strengthen competitiveness, focus on quality of revenue and higher growth segments,” Tarak Mehta, president of ABB’s Electrification business, said in a statement. “Solar is a well-established and key focus for FIMER and as such we believe them to be a very good owner for ABB’s solar inverter business. The combination of the portfolios under FIMER will support further sales growth. Through our intelligent low- and medium-voltage offering, ABB will continue to integrate solar power into a range of smart solutions including smart buildings, energy storage and electric vehicle charging.”

ABB’s solar inverter business has approximately 800 employees in more than 30 countries, with manufacturing and R&D sites located in Italy, India and Finland. It includes the solar inverter business from Power-One which was acquired by ABB’s Discrete Automation and Motion division in 2013.

Both companies will ensure a smooth transition for customers and employees. FIMER will honor all existing warranties and ABB will compensate FIMER for taking the business and its liabilities over.

As a result, ABB expects to take an after-tax non-operational charge of approximately $430 million in the second quarter of 2019 with the half-year results of 2019 being impacted accordingly. Around 75 percent of this charge is represented by cash outflows ABB will pay to FIMER from the deal closing date through 2025. In addition, ABB expects up to $40 million of carve-out related separation costs starting in the second half of 2019.

After closing of the transaction, ABB expects the operational EBITA margin for the Electrification business to be impacted positively by slightly more than 50 basis points, supporting the business’ progress towards its target margin corridor of 15-19 percent.

Completion is expected in the first quarter of 2020 and will be subject to certain conditions, including the completion of the carve-out and prior consultation with employee representative bodies.

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